From 1 October 2024, the Employment (Allocation of Tips) Act 2023, delayed from 1 July 2024, will come into force.  Employers will need to make sure their practices are in line with the new legislation now supported by a Code of Practice. The new Tips Act requires all employers to allocate and distribute customer-received mandatory and discretionary tips, service charges and gratuities to their workers fairly and transparently. It has been confirmed that a robust Tronc arrangement can be used for discretionary tips and will continue to secure an exemption from Class 1 NICs. Therefore businesses must:

 

• Ensure robust policies are in place, including a written tips policy

• Review existing tronc scheme arrangements to ensure compliance with the new rules

• Ensure the troncmaster managing the tronc scheme understands their obligations

 

Additionally, all workers - whether full-time, part-time or agency - must be informed in advance of 1 October 2024 about how these changes may impact them. We have been working with businesses on reviewing and updating their existing tronc arrangements to ensure they are comfortable they have robust policies in place to be compliant with the new Act. 

New rules on tipping – are you prepared? - BDO

 

The involvement of agency workers brings further considerations: temporary agency workers may not be permitted to participate in the business’s tronc arrangement where these are only intended for employees of the business, but they are inside the scope of the new allocation of tips legislation. There can be confusion over what is meant by the definition of an agency worker. Usually it is very clear that a business has a contract for the provision of workers e.g. an employment agency may be contracted to provide a Chef de Partie for 4 x 8 hour shifts and so the individual will need to be considered for the tipping legislation. Whereas a contract for the ‘provision of cleaning services,’ with no reference to the provision of specific individuals, is not likely to be included. Care will be needed to differentiate between provision of temporary labour (inside the tipping rules) or the provision of a fully outsourced facility operated by a third party responsible for the composite service (outside the tipping rules).

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Should you wish to discuss further, Jacqui Roberts jacqui.roberts@bdo.co.uk , Employment Tax Director at BDO LLP, would be happy to help.